Accounting & Tax

Royal Dutch/Shell Fires CFO Judy Boynton

Internal investigation finds that she ''had been aware of the problems for the last two years but had done nothing to correct them.''
Stephen TaubApril 20, 2004

The Royal Dutch/Shell Group has fired group chief financial officer Judy Boynton, the latest casualty in the controversy surrounding the oil giant.

In addition, Shell once again reduced its figures for proven oil and gas reserves; announced that it will restate its financials for 2000 through 2003; and published the results of an internal investigation into Shell’s reserve restatements and the conduct of its managers.

In relieving Boynton of her duties, Shell’s investigation found that she “had been aware of the problems for the last two years but had done nothing to correct them,” according to The New York Times. The former chief financial officer of Polaroid Corp., in 2001 Boynton became the first outsider named as CFO by the almost 100-year-old oil company, according to Bloomberg. She also served as group managing director and executive director of the Shell Transport and Trading Co. Plc.

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The company stated that Boynton will remain with the group in an advisory capacity, at least through the annual meeting in June. Tim Morrison, who began his career with Shell in 1982 and has been group controller since July 2002, will serve as acting group CFO. The company will consider both internal and external candidates to fill the position permanently, added Bloomberg.

Shell announced the personnel changes on the same day that it said an additional 300 million barrels of oil and gas would no longer be considered “proven.” Since January, according to Bloomberg, the company has lowered 2002’s proven reserves by 22 percent. The consequent restatement of financials will reduce earnings by about $100 million per year — less than 1 percent of earnings in the 2000-to-2003 period, noted the company.

“The controls we now have in place will be rigorously enforced and will be subject to far greater levels of scrutiny within Shell,” said chairman Jeroen van der Veer.

The company’s 463-page report — prepared by law firm Davis Polk & Wardwell — also stated that from the day Walter van de Vijver succeeded Sir Philip Watts as chief executive officer of Shell’s exploration and production unit, the two executives engaged in a pointed dialogue concerning the division’s ability to meet a number of targets or “external promises,” particularly those relating to reserves.

Executives including van de Vijver “hoped” that more wells, strengthening natural gas demand, or new drilling licenses would later justify the reserves and resolve the matter, according to the report. The report called that approach “unrealistic,” Bloomberg pointed out. Last month, Watts — then the chairman of Royal Dutch/Shell Group — and van de Vijver were ousted by the company.

The report also cited a striking September 2002 note from Van de Vijver to Shell’s committee of managing directors, which maintained that “the market can only be ‘fooled’ if credibility of the company is high.” The note reportedly added that “unfortunately, we are struggling on all key criteria” in delivering results to investors.

An attorney for Van de Vijver fired off a press release in his defense. According to the release, “The Davis Polk report does not describe the extraordinary efforts Mr. Van de Vijver undertook to fully examine the reserves issues in Nigeria and Oman, including ordering detailed reviews in those countries.” The lawyer also accused the report of taking seemingly incriminating E-mail communications out of context.